What is a key characteristic of Unilateral contracts in insurance?

In insurance, a key characteristic of unilateral contracts is that only one party is legally bound to fulfill the terms of the contract. In the context of an insurance policy, the insurer (the insurance company) makes a promise to pay for certain covered events, such as claims for damages or losses. The insured (the policyholder) pays the premium but does not have the same obligation to fulfill a promise in return; their primary responsibility is to provide accurate information and pay the premium on time.

This typical structure means that the insurer assumes the majority of the obligations under the contract, while the insured does not have any such legally binding promise to the insurer, reflecting the nature of unilateral contracts. In contrast, a bilateral contract, where both parties have mutual obligations, would not adequately describe the insurance contract scenario, as the insurer's commitment is the central, binding element of the agreement.

Understanding this characteristic is crucial for recognizing how insurance relationships and liabilities work, which is a fundamental aspect of studying contracts in insurance.